India’s GDP might decelerate to six computer in FY26 if US levies 50 computer tariff: Moody’s
Moody’s Scores on Friday stated India’s GDP development is more likely to decelerate by about 30 foundation factors to six per cent within the present fiscal if the US implements 50 per cent tariffs from August 27.
Nevertheless, resilient home demand and the power of the companies sector will mitigate the pressure on India, Moody’s stated, including that India’s response to excessive US tariffs will finally decide the impact on its development, inflation and exterior place.
On August 6, the US introduced a further 25 per cent tariff on all Indian imports, along with an present 25 per cent obligation, taking the whole obligation to 50 per cent efficient August 27.
The White Home stated the measure responds to India’s continued buy of Russian oil.
“Ought to India proceed to acquire Russian oil on the expense of the headline 50 per cent tariff price on items it ships to the US, which is at present its largest export vacation spot, we undertaking that actual GDP development could sluggish by round 0.3 proportion factors in contrast with our present forecast of 6.3 per cent development for fiscal 2025-26 (ending March 2026),” Moody’s stated.
The 50 per cent tariff on India compares with the 15-20 per cent obligation for different Asia-Pacific international locations.
India and the US have been negotiating a bilateral commerce settlement (BTA) since March, with an purpose to greater than double the bilateral commerce in items and companies to USD 500 billion by 2030 from the present USD 191 billion. To this point, 5 rounds of talks have been accomplished.
For the sixth spherical, the US group is visiting India from August 25. They’re aiming to conclude the primary part of the settlement by fall (October-November) this yr. The 2 sides are additionally taking a look at an interim commerce deal earlier than the BTA.
Moody’s stated international locations in Asia-Pacific are vying for a larger share of commerce and funding flows amid a restructuring of provide chains triggered by US coverage shifts.
“Past 2025, the a lot wider tariff hole in contrast with different Asia-Pacific international locations would severely curtail India’s ambitions to develop its manufacturing sector, significantly in greater value-added sectors, equivalent to electronics, and should even reverse a number of the good points made lately in attracting associated investments,” Moody’s stated.
Since 2022, India has more and more ramped up its crude oil imports from Russia as demand from the latter’s conventional offtakers dried up amid sanctions tied to its invasion of Ukraine.
“India has been capable of procure no less than a few of its purchases of Russian oil at under world costs, which has helped insulate India’s inflation from the pass-through of worldwide commodity value actions, whereas preempting pressures on its present account deficit,” Moody’s stated.
India’s imports of Russian crude rose to USD 56.8 billion in 2024 from USD 2.8 billion in 2021.
Moody’s stated India retains ample foreign-reserve foreign money buffers to climate exterior volatility.
“The magnitude of the drag on development from tariff obstacles will affect the federal government’s determination to pursue a fiscal coverage response, though we anticipate the federal government will adhere to its deal with gradual fiscal and debt consolidation,” stated the US-based score company.
